Tuesday, December 1, 2015

The Important Points about Marx’s Labour Theory of Value

I am surprised how few people understand them:
(1) as I have carefully documented here, the final view of Engels, on the basis of his edited version of volume 3 of Capital and the remarks of Marx there, was that the law of value in volume 1 of Capital could only be applied as an empirical theory to the pre-modern world of commodity exchange before about the 15th century (Marx 1991: 1038).

(2) this means that the law of value in volume 1 – that commodities tend to exchange at their pure labour values which are anchors for the price system – was a historically contingent phenomenon existing in the “lower stage … of capitalist production” (Marx 1909: 208) and before the emergence of a higher stage of capitalism where Ricardo’s prices of production are the anchors for the price system.

(3) however, in volume 1 of Capital Marx appears to hold that his law of value there does apply to the advanced capitalism of the 19th century. When he published volume 1 of Capital in 1867 he therefore committed himself to this view.

(4) so either (1) his theory as it had been laid out in the three volumes of Capital (the last two being unpublished when he died in 1883) was inconsistent and incoherent or (2) he changed his mind later about the empirical relevance of the law of value in volume 1 for modern capitalism, but preferred not to publish or publicly make known this change in opinion, because he refused to publish any further volumes of Capital in his lifetime.
The way in which Capital was written was very peculiar.

In 1863, Marx abandoned the so-called Manuscript of 1861–1863 (from which was later taken the Theories of Surplus Value) and started the new Manuscript of 1863–1865 which was a first draft of volumes 1, 2 and 3 of Capital.

However, Marx then abandoned the first draft of volume 1 and started again in 1865, so that the published volume 1 was written after drafts of volumes 2 and 3, as Marx himself says in a letter to Sigmund Schott of 3 November, 1877:
Dear Sir,

My best thanks for the packages. Your offer to arrange for other material to be sent to me from France, Italy, Switzerland, etc. is exceedingly welcome, although I feel reluctant to make undue claims on you. I don't at all mind waiting, by the by, nor will this in any way hold up my work, for I am applying myself to various parts of the book in turn. In fact, privatim, I began by writing Capital in a sequence (starting with the 3rd, historical section) quite the reverse of that in which it was presented to the public, saving only that the first volume—the last I tackled—was got ready for the press straight away, whereas the two others remained in the rough form which all research originally assumes. ….

Your most obedient Servant,
Karl Marx
(letter from Marx to Sigmund Schott of 3 November, 1877; Marx and Engels 1992: 287).
In 1865 Marx completed a first draft of volume 3 (McLellan 1995: 304) and then turned to a fresh draft of volume 1, which was in fact a second draft of that first volume (as pointed by Michael Heinrich here).

In February 1866 after being pressed by Engels, Marx agreed to finish and publish volume 1 first (McLellan 1995: 306). He promised to send the first parts of the manuscript to the publisher in November 1866 (McLellan 1995: 306) but took the full manuscript to Hamburg himself in April 1867 (McLellan 1995: 306).

It is likely that, under pressure from Engels to produce a work in defence of communism, Marx’s ideological commitments skewed volume 1 so that it presented capitalism in the worst light possible and an extreme and dogmatic defence of the labour theory of value, which, in view of his work on the draft of volume 3 of Capital, he knew to have severe problems, such as the transformation problem. Nevertheless, he published this dogmatic version of his theory.

As has been pointed out time and again, Marx never bothered to publish volume 2 and 3 of Capital in his lifetime, and the suspicion is that he never did so because he was unsatisfied with his attempts to defend the dogmatic labour theory of value in volume 1 from the problems he knew plagued it.

In the edited version of volume 3 of Capital as published by Engels, Marx, in Chapter 10 of this work, admitted that the law of value in volume 1 could not be applied to modern 19th century capitalism. It could only be applied to a “lower stage … of capitalist production” (Marx 1909: 208) before about the 15th century (Marx 1991: 1038). But he had never said this in volume 1. (A related research question is to what extent Chapter 10 of volume 3 already existed in draft form in 1867.)

Critics at the time noticed the severe and devastating contradiction. And the cult of Marxism ever since has been trying to reconcile and harmonise Marx’s work, with all sorts of desperate tricks and sleights of hand.

McLellan, David. 1995. Karl Marx: A Biography (3rd edn.). Macmillan, London.

Marx, Karl. 1909. Capital. A Critique of Political Economy (vol. 3; trans. Ernst Untermann from 1st German edn.). Charles H. Kerr & Co., Chicago.

Marx, Karl. 1991. Capital. A Critique of Political Economy. Volume Three (trans. David Fernbach). Penguin Books, London.


  1. It is generally agreed that Marx wrote what was to become volume 3 before volume 1. As such, his abstract model of capitalism presented in volume 1 was written fully aware that it was at a high level of abstraction -- namely, the simplifying assumption that commodities exchanged at their values (i.e., all workplaces had the same level of investment and so there was just one industry).

    This is mentioned in a footnote of volume 1:

    "prices are regulated by the average price, i.e. ultimately the value of the commodities. I say 'ultimately' because average prices do not directly coincide with the values of commodities, as Adam Smith, Ricardo, and others believe" (Capital volume 1, Part 2, Chapter 5, p. 269)

    The aim of volume 1 was to show how labour was exploited within production. That is, if every commodity exchanged at its value (in the long term) then why did the commodity labour not get the full product of its labour?

    To do this, he presented an abstract model of the economy -- that is, he removed complicating but irrelevant factors like differences in investment between workplaces/firms. In volume 3, he added these factors and indicated how values become, in practice, "prices of production". The model became more realistic.

    However, the basic point is that the market price of a commodity is regulated by its cost -- which boils down to labour, ultimately -- and that labour is exploited by capital within production because workers sell their labour to an employer.

    Yes, Capital is a big book for such a common-sense perspective. Yes, others (like Proudhon) had argued this long before 1867 (and did not drag it out so much!). However, the basic idea that labour is the source of value and regulates market prices is not problematic -- Smith and Ricardo both recognised it.

    I'm not a Marxist and Marx can and should be criticized on many levels, including his economic theories (and his annoying tendency to proclaim his originality when others said it before him). However, this willful unwillingness to understand the nature of differences in the abstract model building in volume 1 and volume 3 of Capital is just strange.

    You won't convince many people -- particularly Marxists -- who understand the issue by this approach.

    An Anarchist FAQ

    1. "As such, his abstract model of capitalism presented in volume 1 was written fully aware that it was at a high level of abstraction"

      You provide no evidence for this at all, and indeed as my reviews of the chapters of vol. 1 show there are continuous statements and suggestions that the law of value is meant to apply to 19th century capitalism.

      "This is mentioned in a footnote of volume 1:"

      That footnote does not prove what you think it does, for it occurs in a footnote at the end of Chapter 5 and Marx never says here that his whole theory of value in vol. 1 is just a simplifying assumption. This is just lazy and feeble argument.

      Moreover, I've already dealt with this issue here:


      "However, the basic point is that the market price of a commodity is regulated by its cost -- which boils down to labour, ultimately -- "

      No, it doesn't just boil down to labour. Marx is just wrong. Labour is only 1 of other factor input costs. Even more absurd is Marx's idea that certain factor inputs do not even have labour value and therefore ought not to contribute to exchange value.

  2. Iain has very kindly saved me some writing (thanks, Iain!), so I'll just focus on one point:

    Marx’s ideological commitments skewed volume 1 so that it presented capitalism in the worst light possible

    Can you give your argument for why Volume 1 presents capitalism in a poorer light than Volume 3?

    If anything, V1 abstracts away the messy bits so the system appears much smoother and more airtight, and it only ever references crisis in passing. V3, on the other hand, gets into the meat of crisis theory (e.g., the tendency of the rate of profit to fall, etc).

    So, according to the narrative you've constructed, shouldn't these pesky ideological commitments have moved his hand in the other direction?

    1. First, the idea that Marx’s mature view on capitalist crises is based on the tendency of the profit rate to fall is, as Heinrich has argued, the result of Friedrich Engels’ dubious editing of volume 3 of Capital:


    2. As for presenting capitalism in the worst possible light, it is all over the place: e.g., at the end of vol. 1 in "Historical Tendency of Capitalist Accumulation":

      "Along with the constantly diminishing number of the magnates of capital, who usurp and
      monopolise all advantages of this process of transformation, grows the mass of misery, oppression, slavery, degradation, exploitation; but with this too grows the revolt of the working-class, a class always increasing in numbers, and disciplined, united, organised by the very mechanism of the process of capitalist production itself. The monopoly of capital becomes a fetter upon the mode of production, which has sprung up and flourished along with, and under it. Centralisation of the means of production and socialisation of labour at last reach a point where they become incompatible with their capitalist integument. This integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated."
      (Marx 1906: 836-837).

    3. Yes, I recall your use of Heinrich, and my answer to it fortunately hasn't changed since you made that post, so that'll save us some discussion.

      And yes, Marx is quite down on capitalism in volume 1, but you've missed the crux of my question: In what way is this worse than volume 3, which not only maintains the above, but also presents capitalism in even greater, messier detail?

    4. I have not missed it, e.g., in volumes 2 and 3, Marx seemed to concede that increasing use of machinery can be beneficial to workers, rather than as in vol. 1 a source continuing misery:

      "The law of the falling tendency of the rate of profit, or of the relative decline of the appropriated surplus-labor compared to the mass of materialised labor set in motion by living labor does not argue in any way against the fact that the absolute mass of the employed and exploited labor set in motion by the social capital, and consequently the absolute mass of the surplus-labor appropriated by it, may grow."

      Also, in the final chapter of vol. 3 there are qualified comments on the stratification of society which are less extreme and more favourable to capitalism than the endless misery and social polarization I have just quoted in vol. 1.

    5. Also, your game here is quite clear: you ignore the substantive points above in the original post and endlessly through up additional carping distractions.

      You need to answer the questions: So you agree that in commodity exchange until the 15th century commodities "exchanged approximately according to their value" but -- as Engels says -- "[w]e know that this direct realisation of value in exchange ceased and that now it no longer happens.”

      That is, so you agree that modern capitalism no longer has a state of affairs where commodities tend to exchange at true labour values and that individual SNLT labour values are not anchors for the price system, as in this quotation from Marx:

      “The assumption that the commodities of the various spheres of production are sold at their value implies, of course, only that their value is the center of gravity around which prices fluctuate, and around which their rise and fall tends to an equilibrium.” (Marx 1909: 208–210).

    6. I have not missed it, e.g., in volumes 2 and 3, Marx seemed to concede that increasing use of machinery can be beneficial to workers, rather than as in vol. 1 a source continuing misery:

      You've quoted a passage that does not connect to your claim. And you're still not addressing my larger point: None of the conclusions are adjusted, but volume 3 spends time discussing the manner in which capitalism has crises, while volume 1 does not.

      (Anyway, I don't even know why you'd object to a theory on the grounds that it portrays capitalism poorly, considering the orientation of Post Keynesian theorists on the matter.)

      Cherry-picking quotes from either volume (especially ones that don't contain what you claim they do) does not change the way Marx presents capitalism -- as being favorable compared to feudalism and ultimately self-destructive and unfavorable compared to socialism. This much is consistent at least as far back as the Communist Manifesto.

      And now that you've lost the thread, you're reverting back to your "You Need To Answer My Very Important Questions" mode -- a red herring in the first place in this context, made all the more puzzling by the fact that you don't even include a question.

      I hate to say it, but I don't see much in the way of a productive exchange to be had, here, the way this is shaping up. I'll return to the discussion under the previous (November 29) post until you churn out a new one.

    7. Yeah, yeah, run way and hide from this thread once your evasive dishonesty is exposed.